Aramco keeps busy making plans for diversification
▶ Saudi Arabia has kept up with reforms even as oil rebounds
Saudi Aramco is on a roll. The world’s biggest oil producer officially launched International Maritime Industries (IMI) on Friday, its latest entry into a new business as it accelerates efforts to seek new sources of revenue. As part of those efforts, Aramco has been busy striking deals to increase its business interests over the past year.
Saudi Arabia plans to sell as much as 5 per cent of Aramco in an initial public offering, which is a key part of the kingdom’s Vision 2030, as it vies to diversify its economy and reduce its dependence on oil, in line with Crown Prince Mohammed bin Salman’s wider reform plans. The listing which is set for 2018, may raise as much as US$100 billion based on a $2 trillion valuation of the company, making it the largest offering ever globally.
Aramco has been busy striking deals to increase its business interests over the past year
Meanwhile, Aramco is expanding into different business lines, like IMI, a marine yard. The 12 million square-kilometre marine yard facility announced will have the largest production capacity in the Arabian Gulf and will help Aramco and its partners reduce costs, cut down response time and boost agility when it comes to offshore drilling and shipping activities.
The yard will have annual capacity to build four offshore rigs, more than 40 vessels including three very large crude carriers and it will be able to service over 260 maritime products. The JV also comes as the kingdom seeks to rationalise spending and create jobs for local workforce.
Aramco is also accelerating plans to boost its In-Kingdom Total Value Add (IKTVA) Programme, which was launched in December 2015 with an aim to double the percentage of locally-produced energy-related goods and services to 70 per cent by 2021. The programme also is targeting exporting 30 per cent of the total domestic energy goods and services produced in the kingdom over the same time frame.
The challenge for the kingdom is to ensure the non-oil economy expands at sustainable levels to help create jobs for graduates and keep up with the pace of a fast-growing population.
These are important steps being taken by Saudi Arabia and the country’s leadership should be lauded for doing them even as the price of oil rebounds.